HomeMy WebLinkAboutStaff Report 7706
City of Palo Alto (ID # 7706)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 2/27/2017
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Summary Title: Regulatory Agreement for 3020-3028 Emerson Street (Plum
Tree Apartments)
Title: Review and Approval of a Regulatory Agreement, Declaration of
Restrictive Covenants, and Option to Purchase for 3020-3038 Emerson Street
(Plum Tree Apartments). The Project is Exempt from the California
Environmental Quality Act (CEQA) per Section 15061(b)(3).
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that Council approve the attached Regulatory Agreement, Declaration of
Restrictive Covenants, and Option to Purchase for property at 3020-3038 Emerson Street (Plum
Tree Apartments) and authorize the City Manager to execute the agreement.
Background & Discussion
The Plum Tree Apartments is a 10-unit apartment building located at 3020-3080 Emerson
Street in Palo Alto. In December 1991, the City entered into a regulatory agreement with the
Palo Alto Housing Corporation (PAHC), providing $978,000 in Community Development Block
Grant (CDBG) funds to PAHC for the purchase of the property in exchange for the organization’s
operation of low and moderate income housing. The City provided PAHC an additional CDBG
loan in the amount of $34,650 in June 2009 for rehabilitation costs. Among the various
provisions of the 1991 regulatory agreement is the City’s option to repurchase the property for
one dollar at the expiration of the agreement. As required by the 1991 agreement, PAHC
notified the City that the agreement would expire on December 19, 2016 and that the City had
90 days from expiration to exercise its option to purchase the property for one dollar. The City
and PAHC agreed to extend the City’s deadline to exercise its option to March 4, 2017. The City
has until March 4, 2017 to exercise the option or negotiate a new regulatory agreement with
PAHC.
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Staff and PAHC have negotiated a new Regulatory Agreement, Declaration of Restrictive
Covenants, and Option to Purchase (Attachment A) to ensure the continued affordability of the
ten units at the Plum Tree Apartments.
Option to Purchase
Maintaining an option to repurchase for the City preserves a degree of ownership. However,
options of this nature may pose challenges for PAHC should they seek to refinance in the future
because it introduces a possible change in ownership to a lender within the time period of the
loan. The staff recommendation includes a City option for a period of 55 years, but
contemplates negotiation of potential changes if the option creates a disadvantage in the event
of a future funding application by PAHC. If the City decides to exercise its option at the end of
the 55 year period, the City may purchase the property for the purchase price of one dollar. In
addition, the term of the option may be extended for an additional 44 years, or a total of 99
years, if PAHC elects to do so.
Affordability Restrictions
All ten units are required to be rented out exclusively to low and moderate income residents,
with a minimum of 70% of the units to be made available to low income households at
affordable rents. The maximum low income limit is 80% of area median income, which is
currently $79,250 for a four-person household in Santa Clara County. The units may also be
occupied by Section 8 Assisted Households. In the event that a tenant’s income exceeds the
qualifying income for a low income household, the unit shall be occupied by income qualified
household upon being vacated by the over-income household.
Policy Implications
The actions recommended in this report implement the City’s Housing Element policies and
programs supporting the preservation of low income housing. For example,
Policy H1.2: Support efforts to preserve multifamily housing units in existing
neighborhoods.
Policy H3.1: Encourage, foster, and preserve diverse housing opportunities for very low,
low, and moderate income households.
Resource Impact
The City is not providing additional funding to PAHC under this agreement.
Environmental Review:
The project is Categorically Exempt from the California Environmental Quality Act ( CEQA)
pursuant to CEQA Guidelines 15061(b)(3) because it can be seen with certainty that there will
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be no significant effect on the environment. There are no plans for rehabilitating or
redeveloping the site. Any future proposal to reuse the site for another purpose or to redevelop
the site would need to be reviewed pursuant to CEQA prior to any City decision to provide
funding or approvals.
Attachments:
Attachment A: Regulatory Agreement, Declaration of Restrictive Covenants and Option to
Purchase (PDF)